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Prescott, Ohanian

Taxes are much higher than you think

Taking into account all taxes on earnings and consumer spending—including federal, state and local income taxes, Social Security and Medicare payroll taxes, excise taxes, and state and local sales taxes—Edward Prescott has shown (especially in the Quarterly Review of the Federal Reserve Bank of Minneapolis, 2004) that the U.S. average marginal effective tax rate is around 40%. This means that if the average worker earns $100 from additional output, he will be able to consume only an additional $60.

Research by others (including Lee Ohanian, Andrea Raffo and Richard Rogerson in the Journal of Monetary Economics, 2008, and Edward Prescott in the American Economic Review, 2002) indicates that raising tax rates further will significantly reduce U.S. economic activity and by implication will increase tax revenues only a little. …

The economy now faces two serious risks: the risk of higher marginal tax rates that will depress the number of hours of work, and the risk of continuing policies such as Dodd-Frank, bailouts, and subsidies to specific industries and technologies that depress productivity growth by protecting inefficient producers and restricting the flow of resources to the most productive users.

If these two risks are realized, the U.S. will face a much more serious problem than a 2013 recession. It will face a permanent and growing decline in relative living standards.

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It will face a permanent and growing decline in relative living standards.

Music to Obama’s ears.

We can’t drive our SUVs and, you know, eat as much as we want and keep our homes on, you know, 72 degrees at all times, whether we’re living in the desert or we’re living in the tundra, and then just expect every other country is going to say OK, you know, you guys go ahead keep on using 25 percent of the world’s energy, even though you only account for 3 percent of the population, and we’ll be fine. Don’t worry about us. That’s not leadership. ~ Barack Obama

The economy now faces two serious risks: the risk of higher marginal tax rates that will depress the number of hours of work, and the risk of continuing policies such as Dodd-Frank, bailouts, and subsidies to specific industries and technologies that depress productivity growth by protecting inefficient producers and restricting the flow of resources to the most productive users.

If these two risks are realized, the U.S. will face a much more serious problem than a 2013 recession. It will face a permanent and growing decline in relative living standards.

No!.. No! ..No! The rules of reality don’t mean anything anymore – we’re in the Age of Obama – were people can be taxed and it doesn’t change their behavior.

Where were all these articles and letters from economists prior to the election? None of this is news. It doesn’t matter anymore, because this administration does not care what its policies will do to the economy, which is not news either.

Remember, if you add up aaaallllll the taxes you pay at the end of the year, including “hidden” taxes like gas taxes, taxes that are “passed” along to consumers in food, services, etc. and they all add up to 51% (or more) of your income….you are no longer working for yourself or your family. You are working for the government. Your family gets the leftovers.

All those sacrifices you’ve made, all the time you spend away from your family busting your butt, all the time in school (including debt), etc……you are not doing that for yourself or your family. You are primarily doing it for the government.

So, with that in mind, recall that we are running trllion-per-year deficits.

Conclusion: the government is confiscating 51% of the prime of your life and they are squandering it. All the sacrifices you’ve made have been literally for nothing.

I’ve had esteemed members of the Democratic Socialist Worker’s party tell me that if you tax someone twice as much they will work twice as much.

This country has to get serious in stocking up on padded rooms and strait jackets..

Galt2009 on December 12, 2012 at 11:33 AM

They WILL work harder — at avoiding taxes. Liberals think they can legislate away human behavior, but they can’t. As long as taxes are in any way avoidable, people will find a way to avoid them. People want to keep the money they have earned, and they instinctively understand that they can use their money more wisely than government can.

The only way to make sure everyone pays taxes and eliminate the drag on the economy of tax avoidance is to eliminate individual and corporate income taxes and go to a VAT.

Taxes are much higher than youpeople who don’t understand the concept of arithmetic think

My favorite of all the “prey on the weak-minded” accounting tricks? The Social Security tax. People only see half of it on their paycheck; and they’re told to believe the other half is somehow paid by the evil corporation that employs them.

No. Of course it — along with every other expense the company is forced to pay on your behalf — all comes out of money you’d otherwise be paid, feeb.

So, with that in mind, recall that we are running trllion-per-year deficits. Conclusion: the government is confiscating 51% of the prime of your life and they are squandering it. All the sacrifices you’ve made have been literally for nothing.
visions on December 12, 2012 at 11:42 AM

Who do you think is going to end up paying all those deficits, plus interest… Congressmen? Or maybe Obama will cover it out of his stash?

Nope. If you want the REAL marginal tax rate, take all the current taxes and add about 20% for the deficit “investment” we’re all making. And remember, that will come OFF THE TOP. So, as the government continues its exponential growth and the private sector continues to collapse, it’s entirely possible that the total effective tax rate could eventually come out to more than 100%.

But it probably won’t quite get to that point. Before too long this whole damned thing is going to collapse like a house of cards in a hurricane. Then we’ll go to the Third-World system; where the government doesn’t take “taxes” from citizens; it just owns everything and doles out to you what it thinks you deserve.

I don’t want to hear when republicans win the senate again..no matter when that is, that the government is counting on that revenue and that republicans will have to PAY FOR it if they change the tax rates.

I want lower, simpler tax rates and rules.

The end of the Obama tax rebate on social security taxes has to end. All these people do not know how much money is being charged to them and lost, not in a LockBox, and won’t know unless the rates go back to what a Democrat CONGRESS set them at.

SSI (disability) and other programs have to end. Let them be optional if you choose to pay in. SSI is misused as a welfare program of last resort. Your SS rates should not be based on people getting exceptions that are not 67 years old yet.

Walk it over the cliff Obama, it will be terrible, and we get the blame. And if a deal can be worked out in time, it will be terrible and we conservatives will get the blame.

It needs fixing, lets go directly there, do not pass go, do NOT collect $200.